“We have had a great run on equities and have been overweight in those for three years. Last year we had a great run and have been taking profit on those small and mid caps that have massively overperformed,” Holland says.

The firm’s portfolios had a difficult April as it had built positions in some of the large cap funds it holds. The large cap funds all had positions in annuity providers, which saw share prices tumbling in the wake of the pension freedoms set out in the Budget.

Holland says: “April was painful because three funds we held found themselves holding annuity companies which was obviously tough because some of those stocks halved on the Budget announcement.”

Holland says despite the drop during April, TAM has stuck with the funds because of its faith in the respective fund managers.

He adds many investors, advisers and managers have been surprised by the market correction which has seen money moving to large cap stocks and away from small and mid cap.

“People were not interested in large cap before, the market adjustment took place and the price movement has wrong-footed many people up to their eyeballs in small and mid caps going for extra growth. It happened in a very short period of time and is something we cautioned not just as we came into January but as we came in to the start of last year.”

The low volume nature of UK small and mid caps means, according to Holland, that most managers hold similar stocks which could push the falling mid cap yields to continue for some time.

“If you look at a stock like [oil and gas exploration firm] Aztec which all managers already own, if there is a 20 per cent fall in that stock, then there is no marginal net buyer to restore the stock to where it was.

“The value scare we have experienced could continue past the summer but it is something we are fairly relaxed about because we have the large cap exposure to combat that,” he says.

Holland is wary of the hunt for yield driven by investors who are disenchanted by low interest rates and says the increasing move to riskier assets is driven by clients.

He says: “Clients cannot believe how little they are getting from their bank. The hunt for yield is driven by the client and that is what we are seeing by clients being put into a property fund or emerging market debt funds.

“The problem is where you have clients in these funds, because of the returns, everybody dances near the door as they are waiting for interest rates to go up. The minute interest rates do go up everybody tries to leave and the fund provider has to gate the portfolio to prevent capital outflows.”

Until recently, TAM held an overweight cash position of 10 per cent largely due to taking profits from the UK small, mid and large cap holdings over the last six weeks.

Holland says this has been red-uced to 5 per cent in the last few weeks.

Holland says the fund offers exposure to the secondary market which he says offers some overlooked opportunities.

The firm pulled out of property in June last year having been invested in the Ignis UK Property fund. It sold out on the basis the portfolio was holding too much cash.

“The portfolio was moving to a bid price also so we thought it would be making it more difficult to come out of the fund, so we made the decision to sell down around a year-and-a-half ago.”

The latest addition to the portfolio is a 5 per cent weighting to the £1.2bn Schroder Tokyo fund managed by Andrew Rose.

He says: “We believed the second leg of a Japan rally will not be the same as the low yen policy induced rally which drew in tremendous foreign buying in 2013.

“In the longer term, we believe Japanese equities can be revalued upwards within a relatively stable Yen environment and so we bought the Schroder Tokyo fund

“This has less of a strategy of buying large exporters who typically get bought up on weaker yen.”

About TAM Asset Management

The company can trace its roots back to 1938 as a stockbroking firm in the City of London before it became part of one of Europe’s largest financial services firms, Helvetia. In late 2012, TAM’s management completed a buyout from Helvetia and is now majority-owned by its management. Its head offices are in the City although TAM also has an office in Mauritius and deals with introducers throughout the UK, Asia, Australia and New Zealand. It has £175m in assets under management and links with 50 IFAs in the UK.

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